Simple Entropic Derivation of a Generalized Black-Scholes Option Pricing Model
Open Access
- 3 April 2000
- Vol. 2 (2) , 70-77
- https://doi.org/10.3390/e2020070
Abstract
A straightforward derivation of the celebrated Black-Scholes Option Pricing model is obtained by solution of a simple constrained minimization of relative entropy. The derivation leads to a natural generalization of it, which is consistent with some evidence from stock index option markets.Keywords
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